In 2018, the U.S President Donald Trump started setting tariffs on Chinese goods imported in the US due to, what the President said was “unfair trade practices” and violation of intellectual property rights. This decision was followed by China Imposing tariffs on goods from the U.S beginning a series of trade barriers and imposition of mounting tariffs on either side.
Fast-forwarding to 2020, and the US has imposed tariffs worth more than $360bn on Chinese goods while China has imposed tariffs of more than $110bn on US goods. With both the countries at the brink of a full-blown trade war, and the tariffs adversely impacting both the countries, the US and China came to a trade agreement in February 2020. Currently in the Phase One of the agreement, China has committed to buy $200 billion worth of more US goods and services in the next two years above its purchases in 2017 and also look into complaints by the US regarding intellectual property rights and forced technology transfer. In exchange the US will reduce the tariffs from 15 % to 7.5% on $120bn worth of Chinese products.
What’s in it for India?
The trade agreement has further weakened the World Trade Organization and is a warning signal to countries like India who conduct trade with China and other countries as per the rules of the WTO. But, before this deal, the trade war between the two countries since 2018, had not affected their trade with India majorly. Though with the United States of America now relatively free of the tensions with China, can focus on having more trade with other countries. India and the U.S at this point are negotiating a Free Trade Agreement which is expected to come soon. Under the FTA, India has proposed a full restoration of benefits under the Generalised System of Preferences (GSP) scheme and certain concessions for agricultural products.
With China agreeing to buy more products from the U.S, Indian exports to China may suffer with fruits, vegetables and other products being exported more from the U.S than India. But, on the other hand, with the US having IT complaints against China, Indian IT companies and services can fill the deficit that this trade deal has caused. Likewise, due to the high U.S tariffs many companies may consider shifting from China to India.
However, currently due to the conflict of India and China at the LAC, trade has suffered a setback in both the countries. For example, the Indian government has banned more than a hundred Chinese Apps on grounds of inadequate privacy.
Due to Covid – 19, global trade has immensely suffered and it may take some time to assess the impact of the trade deal between America and China. The tension at LAC may also have far reaching economic impact for India and China but currently the FTA with US looks hopeful for India economically.